High valuations. Future worries spur some dealers to sell their stores.

June 21, 2021

Among the reasons: Lack of succession, concerns about EVs cutting their service profits, more talk of direct-to-consumer sales and not wanting to invest in facilities.

Bruce Patchett must have fielded two dozen calls over the past two years from people who wanted to buy Bruce Chevrolet in Hillsboro, Ore., a store the New Zealand native had operated for 41 years.

Patchett, 75, had no children to transition the business to and broker Joe Beaver from Dave Cantin Group’s DCG Acquisitions called him last year at “the right time,” Patchett said. He sold his store near Portland in April to Dick’s Auto Group. “I just felt it was time for me to move on,” he said.

A range of factors — from concern over future electric vehicles impacting all-important service and parts profits to heightened talk of direct-to-consumer sales and not wanting to make investments in digital retail to compete with larger groups or to adhere to mandated facilities requirements — has persuaded some dealers to sell their stores, buy-sell brokers say.

Many simply are at or near retirement age and may not have a succession plan and, like Patchett, are exiting the business altogether, brokers told Automotive News.

Also, dealers are motivated to sell amid record prices for their stores and fears of possible higher capital gains taxes under President Joe Biden’s administration, adding urgency to the uptick in buy-sell activity this year, brokers say.

Expenses

Dealers are concerned about capital expenditures that may be needed for their facilities to sell EVs, coupled with worries, particularly in urban areas, that service revenue could decrease in the future with more electric vehicles, said Brady Schmidt, CEO of National Business Brokers Inc. in Irvine, Calif.

“The sole proprietor that’s owning a dealership is above 70 years old right now … [and] you’re thinking about, well, ‘How much more money do I want to put into my business, and how much longer do I have before I don’t want to do this anymore?’ ” Schmidt said. “So all of these things are driving that. When you have a dealer body that is on the older side, any of these things are going to drive turnover.”